The Role of Corporate Governance for Acquisitions by the Emerging Market Multinationals: Evidence from India

53 Pages Posted: 10 May 2017

See all articles by Burcin Col

Burcin Col

Pace University-Lubin School of Business

Kaustav Sen

Pace University - Lubin School of Business

Date Written: May 9, 2017

Abstract

Acquisitions by emerging market firms of targets located in developed markets have increased drastically over the recent years. We use this setting to test Coffee’s (1999) bonding hypothesis in a cross-border M&A context by examining whether acquirers adopt the corporate governance practices prevalent in the target’s country. Using firm-level data spanning 2001-2010, we find that (i) ownership and board characteristics of Indian firms change significantly after acquiring developed market targets, (ii) the change in firm governance is more pronounced when the target countries have better investor protection and (iii) acquirers that exhibit changes in firm governance are associated with higher valuation after these transactions. These findings suggest that emerging market firms bond to higher corporate governance standards of the developed markets through cross-border acquisitions.

Keywords: Corporate Governance, Cross-Border M&As, Emerging Markets

JEL Classification: G15, G34, G38

Suggested Citation

Col, Burcin and Sen, Kaustav, The Role of Corporate Governance for Acquisitions by the Emerging Market Multinationals: Evidence from India (May 9, 2017). Pace University Accounting Research Paper No. 2017/02. Available at SSRN: https://ssrn.com/abstract=2965630 or http://dx.doi.org/10.2139/ssrn.2965630

Burcin Col (Contact Author)

Pace University-Lubin School of Business ( email )

One Pace Plaza
New York, NY 100038
United States

Kaustav Sen

Pace University - Lubin School of Business ( email )

1 Pace Plaza
New York, NY 10038-1502
United States
212 618 6413 (Phone)
212 618 6410 (Fax)

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